Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

After studying the economy, you forecast that there is a 70% chance of a good economy next year and a 30% chance of a poor

image text in transcribed

After studying the economy, you forecast that there is a 70% chance of a good economy next year and a 30% chance of a poor economy. If the economy is good, you estimate that a stock you have been following would have a 21% return. Likewise, if the economy is poor, you estimate a -6% return for that same stock. The risk-free rate is 4.5%. What is the standard deviation of the expected returns for this stock? (Answer to the nearest tenth of a percent, but do not use a percent sign). Probability Return Good Economy 70% Poor Economy 30% 21% -6% Risk-Free Rate = 4.5

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Currency Wars Offense And Defense Through Systemic Thinking

Authors: Jeffrey Yi-Lin Forrest , Yirong Ying , Zaiwu Gong

1st Edition

3319677640,3319677659

More Books

Students also viewed these Finance questions